Chapter 5 - Solution Manual

Chapter 05 - Consolidation of Less-than-Wholly-Owned Subsidiaries Acquired at More than Book Value

CHAPTER 5 CONSOLIDATION OF LESS-THAN-WHOLLY-OWNED SUBSIDIARIES ACQUIRED AT MORE THAN BOOK VALUE ANSWERS TO QUESTIONS Q5-1 The noncontrolling interest is reported as a separate item in the stockholders’ equity section of the balance sheet. Past practice often presented the noncontrolling interest between long-term liabilities and stockholders’ equity. Q5-2 The consolidated balance sheet always includes 100 percent of the subsidiary’s assets and liabilities. When the parent holds less than 100 percent ownership of the subsidiary, the noncontrolling interest’s claim on those net assets must be reported. Q5-3 The income statement portion of the consolidation worksheet is expanded to include a line for income assigned to the noncontrolling interest. This amount is deducted from consolidated net income in computing income to the controlling interest. The balance sheet portion of the worksheet also is expanded to include the claim of the noncontrolling shareholders on the net assets of the subsidiary. Q5-4 The balance assigned to the noncontrolling interest is based on the fair value of the noncontrolling interest at the date of acquisition. Q5-5 Consolidated retained earnings includes only amounts attributable to the shareholders of the parent company. Thus, none of the retained earnings is assigned to the noncontrolling interest. Q5-6 One hundred percent of the fair value of the subsidiary’s assets is included. Q5-7 The amount of goodwill at the date of acquisition is determined by deducting the fair value of the net assets of the acquired company from the sum of the fair value of the consideration given by the acquiring company and the fair value of the noncontrolling interest. The resulting goodwill must be apportioned between the controlling and noncontrolling interest. Under normal circumstances, goodwill apportioned to the noncontrolling interest will equal the excess of the fair value of the noncontrolling interest over its proportionate share of the fair value of the net assets of the acquired company. Q5-8 Income assigned to the noncontrolling interest normally is a proportionate share of the net income of the subsidiary. Q5-9 Income assigned to noncontrolling shareholders is reported as a deduction from consolidated net income in arriving at income assigned to the parent company shareholders. Q5-10 Dividends paid to noncontrolling shareholders are eliminated in preparing the consolidated statement of retained earnings. Only dividends paid to the parent company shareholders are reported as dividends distributed to shareholders.

5-1


Q5-11 When the parent owns all the shares of a subsidiary (and the subsidiary has no other publicly traded securities outstanding), it is free to decide whether it wishes to publish separate statements for the subsidiary. In some cases creditors, regulatory boards, or other interested parties may insist that such statements be produced. If the parent does not own all the shares of the subsidiary, the subsidiary normally would be expected to publish separate financial statements for distribution to the noncontrolling shareholders. In general, the consolidated statements are published for use by parent company shareholders and are likely to be of little use to shareholders of the subsidiary. Q5-12 Other comprehensive income elements reported by the subsidiary must be included in other comprehensive income in the consolidated financial statement. If the subsidiary is not wholly owned, income assigned to the noncontrolling interest will include a proportionate share of the subsidiary’s other comprehensive income. Q5-13 The parent’s portion of the subsidiary’s other comprehensive income is included in comprehensive income attributable to the controlling interest. Q5-14 Prior to FASB 141R (ASC 805), the differential was computed as the difference between the fair value of the consideration given in acquiring ownership of the subsidiary and the parent’s portion of the book value of the subsidiary’s net assets. Q5-15 Prior to FASB 141R (ASC 805), goodwill was reported as the difference between the fair value of the consideration given in acquiring ownership of the subsidiary and the parent’s portion of the fair value of the subsidiary’s net assets. Q5-16 Prior to FASB 141R (ASC 805), consolidated net income was computed by deducting income to noncontrolling interest from consolidated revenues less expenses. Q5-17* The only effect of a negative balance in retained earnings is the need for a credit to subsidiary retained earnings, rather than a debit to retained earnings, when the stockholders’ equity accounts of the subsidiary and the investment account of the parent are eliminated. Q5-18* In the period in which the land is sold, the gain or loss recorded by the subsidiary must be adjusted by the amount of the differential assigned to the land. When the differential is assigned in the worksheet eliminating entries at the end of the period, a debit will be made to the gain or loss on sale of land that came to the worksheet from the subsidiary’s books.

5-2


SOLUTIONS TO CASES C5-1 Consolidation Worksheet Preparation a. If the parent company is using the equity method, the elimination of the income recognized by the parent from the subsidiary generally should not be equal to a proportionate share of the subsidiary’s dividends. If the parent has recognized only dividend income from the subsidiary, it is using the cost method. b. It should be possible to tell if the preparer has included the parent's share of the subsidiary's reported income in computing consolidated net income. It is not possible to tell from looking at the worksheet alone whether or not all the adjustments that should have been made for amortization of the differential or to eliminate unrealized profits have been properly treated in computing the consolidated net income. c. If the parent paid more than its proportionate share of the fair value of the subsidiary’s net assets, the eliminating entries relating to that subsidiary should show amounts assigned to individual asset accounts for fair value adjustments and to goodwill when the investment account balance is eliminated and any noncontrolling interest is established in the worksheet. It should be relatively easy to determine if this has occurred by examining the consolidation worksheet. d. If the preparer has made a separate entry in the worksheet to eliminate the change in the parent’s investment account during the period, the easiest way to ascertain the parent’s subsidiary ownership percentage is to determine the percentage share of the subsidiary’s dividends eliminated in that entry. Another approach might be to divide the total amount of the parent’s subsidiary investment account eliminated in the worksheet by the sum of the total parent’s investment account eliminated and the total amount of the noncontrolling interest established in the worksheet through eliminating entries. However, this approach assumes that the fair value of the consideration given by the parent when acquiring its subsidiary interest and the fair value of the noncontrolling interest on that date were proportional, which is usually, by not always, the case.

5-3


C5-2 Consolidated Income Presentation MEMO TO:

Treasurer Standard Company

FROM: RE:

, Accounting Staff Allocation of Consolidated Income to Parent and Noncontrolling Shareholders

FASB 160 (ASC 810) specifies that consolidated net income reflects the income of the entire consolidated entity and that consolidated net income must be allocated between the controlling and noncontrolling interests. Earnings per share reported in the consolidated income statement is based on the income allocated to the controlling interest only. Consolidated net income increased by $34,000 from 20X4 to 20X5, an increase of 52 percent. However, consolidated net income allocated to the controlling interest increased by $24,100 from 20X4 to 20X5, an increase of only 38 percent. The increase in the controlling interest’s share of consolidated net income did not keep pace with the increase in sales because nearly all of the sales increase was experienced by Jewel, which has a very low profit margin. In addition the parent receives only 55 percent of the increased profits of the subsidiary. Consolidated net income for the two years is computed and allocated as follows: 20X4 $160,000 (a) (94,000)(c) $ 66,000 (2,700)(e) $ 63,300

Consolidated revenues Operating costs Consolidated net income Income to noncontrolling shareholders Income to controlling shareholders (a) (b) (c) (d) (e) (f)

$100,000 + $60,000 $120,000 + $280,000 ($100,000 x .40) + ($60,000 x .90) ($120,000 x .40) + ($280,000 x .90) ($60,000 x .10 x .45) ($280,000 x .10 x .45)

Primary citations: FASB 160 (ASC 810) Secondary source: ARB 51 (ASC 810)

5-4

20X5 $400,000 (b) (300,000)(d) $100,000 (12,600) (f) $ 87,400


C5-3 Pro Rata Consolidation MEMO To:

Financial Vice-President Rose Corporation

From: Re:

, Senior Accountant Pro Rata Consolidation of Joint Venture

This memo is in response to your request for additional information on the desirability of using pro rata consolidation rather than equity method reporting for Rose Corporation’s investment in its joint venture with Krome Company. The equity method is used by most companies in reporting their investments in corporate joint ventures. [APB Opinion, Par. 16; ASC 323] While APB 18 provides guidance for joint ventures that have issued common stock, it does not provide guidance for ownership of noncorporate entities. Interpretation No. 2 to APB 18 (ASC 323) suggests that the equity method would be appropriate for unincorporated entities as well. [APB 18, Int. #2] Assuming the joint venture with Krome Company is unincorporated, Rose owns an undivided interest in each asset held by the joint venture and is liable for its share of each of its liabilities and, under certain circumstances, the entire amount. In this case, it can be argued pro rata consolidation provides a more accurate picture of Rose’s assets and liabilities, although not all agree with this assertion. Pro rata consolidation is generally considered not acceptable in this country, although it is a widely used industry practice in a few industries such as oil and gas exploration and production. If the joint venture is incorporated, Rose does not have a direct claim on the assets of the joint venture and Rose’s liability is sheltered by the joint venture’s corporate structure. In this case, continued use of the equity method appears to be appropriate. Primary citations: APB 18; ASC 323 APB 18, INT #2

5-5


C5-4 Elimination Procedures a. The eliminating entries are recorded only in the consolidation worksheet and therefore do not change the balances recorded on the company's books. Each time consolidated statements are prepared the balances reported on the company's books serve as the starting point. Thus, all the necessary eliminating entries must be entered in the consolidation worksheet each time consolidated statements are prepared. b. For acquisitions after the effective date of FASB 141R (ASC 805), the noncontrolling interest at a point in time is equal to its fair value on the date of combination, adjusted to date for a proportionate share of the undistributed earnings of the subsidiary and the noncontrolling interest’s share of any write-off of differential. Another approach to determining the noncontrolling interest at a point in time is to add the remaining differential at that time to the subsidiary’s common stockholders’ equity and multiply the result by the noncontrolling interest’s proportionate ownership interest in the subsidiary. c. In the consolidation worksheet the ending balance assigned to noncontrolling interest is derived by crediting noncontrolling interest for the starting balance, as indicated in the preceding question, and then adding income assigned to the noncontrolling interest in the consolidated income statement and deducting a pro rata portion of subsidiary dividends declared during the period. d. All the stockholders' equity account balances of the subsidiary must be eliminated each time consolidated financial statements are prepared. Intercompany receivables and payables, if any, must also be eliminated. e. The "investment in subsidiary" and "income from subsidiary" accounts must be eliminated each time consolidated financial statements are prepared. Intercompany receivables and payables, if any, must also be eliminated.

5-6


C5-5 Changing Accounting Standards: Monsanto Company a. Monsanto reported the income to noncontrolling (minority) shareholders of consolidated subsidiaries as an expense in the continuing operations portion of its 2007 income statement. b. Monsanto reported the noncontrolling interest in consolidated subsidiaries in other liabilities in its consolidated balance sheet. c. In 2007, Monsanto’s treatment of its noncontrolling interest in its consolidated financial statements, although theoretically objectionable, was considered acceptable. The noncontrolling (minority) interest did not fit the definition of a liability, and its share of income did not fit the definition of an expense. Nevertheless, prior to 2008 no authoritative pronouncement prohibited the treatment exhibited by Monsanto. With the issuance of FASB 160 (ASC 810), however, Monsanto’s 2007 treatment became unacceptable. The noncontrolling interest is now required to be treated as an equity item, with the income attributed to the noncontrolling interest treated as an allocation of consolidated net income. d. Monsanto provided customer financing through a lender that was a special purpose entity. Monsanto had no ownership interest in the special purpose entity but did consolidate it because Monsanto effectively originated, guaranteed, and serviced the loans. Monsanto had a 9 percent ownership interest in one variable interest entity and a 49 percent ownership interest in another. Neither entity was consolidated because Monsanto was not the primary beneficiary of either entity.

5-7


SOLUTIONS TO EXERCISES E5-1 Multiple-Choice Questions on Consolidation Process 1. d 2. d 3. b 4. d [AICPA Adapted] E5-2 Multiple-Choice Questions on Consolidation [AICPA Adapted] 1. b 2. c 3. a

$650,000 = $500,000 + $200,000 - $50,000

4. c

$95,000 = ($956,000 / 0.80) - $1,000,000 - $100,000

5. c

$251,000 = .20[($956,000 + $239,000) + ($190,000 - $5,000 - $125,000)]

5-8


E5-3 Eliminating Entries with Differential a. Equity Method Entries on Game Corp.'s Books: 49,20 Investment in Amber Corp. Cash Record the initial investment in Amber Corp.

0 49,200

Book Value Calculations: NCI 40% Ending book value

+

Game Corp. 60%

22,800

=

34,200

Common Stock

+

20,000

Retained Earnings 37,000

6/10/X8 Goodwill = 0

Identifiable excess = 15,000

60% Book value = 34,200

$49,200 Initial investment in Amber Corp.

Basic elimination entry Common stock Retained earnings Investment in Amber Corp. NCI in NA of Amber Corp. Excess Value (Differential) Calculations: NCI 40% + Beginning balances 10,000

20,000 37,000 34,200 22,800

Game Corp. 60% 15,000

5-9

=

Inventory 5,000

+

Buildings & Equipment 20,000


Excess value (differential) reclassification entry: Inventory 5,000 Buildings & Equipment 20,000 Investment in Amber Corp. NCI in NA of Amber Corp.

15,000 10,000

E5-3 (continued) Investment in Amber Corp. Acquisition Price

49,200 34,200 15,000

Basic Excess Reclass.

0

b.

Journal entries used to record transactions, adjust account balances, and close income and revenue accounts at the end of the period are recorded in the company's books and change the reported balances. On the other hand, eliminating entries are entered only in the consolidation worksheet to facilitate the preparation of consolidated financial statements. As a result, they do not change the balances recorded in the company's accounts and must be reentered each time a consolidation worksheet is prepared.

E5-4 Computation of Consolidated Balances a. Inventory

$140,000

b. Land

$ 60,000

c.

$550,000

Buildings and Equipment

d. Fair value of consideration given by Ford Fair value of noncontrolling interest Total fair value Book value of Slim’s net assets Fair value increment for: Inventory Land Buildings and equipment (net) Fair value of identifiable net assets Goodwill

$450,000 20,000 (10,000) 70,000

$470,000 117,500 $587,500

(530,000) $ 57,500

e. Investment in Slim Corporation: None would be reported; the balance in the investment account is eliminated. f.

Noncontrolling Interest ($587,500 x .20)

$117,500

5-10


E5-5 Balance Sheet Worksheet Cash and Receivables Retained Earnings Accrued interest earned by Power Co.

900 900

Equity Method Entries on Power Co.'s Books: Investment in Pleasantdale Dairy 270,000 Cash Record the initial investment in Pleasantdale Dairy

270,000


Power Co. 90%

+

28,000

=

Common Stock

252,000

+

60,000

Goodwill = 0


90% Book value = 252,000

$270,000 Initial investment in Pleasantdale Dairy

Basic elimination entry Common stock Retained earnings Investment in Pleasantdale Dairy NCI in NA of Pleasantdale Dairy

60,000 220,000 252,000 28,000

5-11



E5-5 (continued) Excess Value (Differential) Calculations: NCI Power Co. 10% + 90% Beginning balances 2,000 18,000

=

Land 20,000

Excess value (differential) reclassification entry: Land 20,000 Investment in Pleasantdale Dairy NCI in NA of Pleasantdale Dairy Eliminate intercompany accounts: Current Payables Cash and Receivables

18,000 2,000

8,900 8,900

Investment in Pleasantdale Dairy Acquisition Price

270,000 252,000 18,000


0 Power Co.

Pleasantdale Dairy

Cash and Receivables

130,900

70,000

Inventory

210,000

90,000

70,000

40,000

Buildings & Equipment (net)

390,000

220,000

Investment in Pleasantdale Dairy

270,000

Elimination Entries DR

CR

Consolidated

Balance Sheet

Land

8,900

192,000 300,000

20,000

130,000 610,000 252,000

0

18,000 Total Assets

1,070,900

420,000

20,000

80,000

40,000

8,900

Long-Term Liabilities

200,000

100,000

Common Stock

400,000

60,000

60,000

400,000

Retained Earnings

390,900

220,000

220,000

390,900

Current Payables

260,900

1,232,000 111,100 300,000

NCI in NA of Pleasantdale Dairy

28,000

30,000

2,000 Total Liabilities & Equity

1,070,900

420,000

5-12

288,900

28,000

1,232,000


E5-6 Majority-Owned Subsidiary Acquired at Greater than Book Value a. Equity Method Entries on Zenith Corp.'s Books: Investment in Down Corp. Cash Record the initial investment in Down Corp.

102,200 102,200


37,500

+

Zenith Corp. 70%

=

Common Stock

87,500

+

40,000




70% Book value = 87,500

Basic elimination entry Common stock Retained earnings Investment in Down Corp. NCI in NA of Down Corp.

$102,200 Initial investment in Down Corp.

40,000 85,000 87,500 37,500

Excess Value (Differential) Calculations: NCI Zenith Corp. 30% + 70% Beginning balances 6,300 14,700

5-13

=

Inventory 6,000

+


Chapter 05 - Consolidation of Less-than-Wholly-Owned Subsidiaries Acquired at More than Book Value E5-6 (continued) Excess value (differential) reclassification entry: Inventory 6,000 Buildings & Equipment 15,000 Investment in Down Corp. NCI in NA of Down Corp.

14,700 6,300

Eliminate intercompany accounts: Accounts Payable Accounts Receivable

12,500

12,500

Optional accumulated depreciation elimination entry Accumulated depreciation 80,000 Building & equipment

80,000

Investment in Down Corp. Acquisition Price

102,200 87,50 0 14,700


0 b. Elimination Entries DR CR

Zenith Corp.

Down Corp.

50,300 90,000 130,000 60,000 410,000 (150,000) 102,200

21,000 44,000 75,000 30,000 250,000 (80,000)

Total Assets

692,500

340,000

101,000

Accounts Payable Mortgage Payable Common Stock Retained Earnings NCI in NA of Down Corp.

152,500 250,000 80,000 210,000

35,000 180,000 40,000 85,000

12,500

Total Liabilities & Equity

692,500

Balance Sheet Cash Accounts Receivable Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Down Corp.

340,000

5-14

12,500 6,000 15,000 80,000

80,000 87,500 14,700 180,000

40,000 85,000 137,500

37,500 6,300 37,500

Consolidated 71,300 121,500 211,000 90,000 595,000 (150,000) 0 938,800 175,000 430,000 80,000 210,000 43,800 938,800


E5-6 (continued) c.

Zenith Corporation and Subsidiary Consolidated Balance Sheet December 31, 20X4 Cash Accounts Receivable Inventory Land Buildings and Equipment Less: Accumulated Depreciation Total Assets

$595,000 (150,000)

Accounts Payable Mortgage Payable Stockholders’ Equity: Controlling Interest: Common Stock Retained Earnings Total Controlling Interest Noncontrolling Interest Total Stockholders’ Equity Total Liabilities and Stockholders' Equity

5-15

$ 71,300 121,500 211,000 90,000 445,000 $938,800 $175,000 430,000

$ 80,000 210,000 $290,000 43,800

333,800 $938,800


E5-7 Consolidation with Minority Interest Equity Method Entries on Temple Corp.'s Books: Investment in Dynamic Corp. Cash Record the initial investment in Dynamic Corp.

390,000 390,000


90,000

+

Temple Corp. 75%

=

Common Stock

270,000

+

Retained Earnings

120,000

240,000

12/31/X4 Goodwill = 33,000


75% Book value = 270,000

Basic elimination entry Common stock Retained earnings Investment in Dynamic Corp. NCI in NA of Dynamic Corp.

$390,000 Initial investment in Dynamic Corp.

120,000 240,000 270,000 90,000

Excess Value (Differential) Calculations: NCI Temple Corp. 25% + 75% Beginning balances 40,000 120,000

=

Buildings 80,000

Excess value (differential) reclassification entry: Buildings 80,000 Inventories 36,000 Goodwill 44,000 Investment in Dynamic Corp. 120,000 NCI in NA of Dynamic Corp. 40,000

5-16

+

Inventories 36,000

+

Goodwill 44,000


E5-8 Worksheet for Majority-Owned Subsidiary a. Equity Method Entries on Glitter Enterprises's Books: Investment in Lowtide Builders 90,000 Cash 90,000 Record the initial investment in Lowtide Builders Book Value Calculations: NCI 40% Ending book value

Glitter Enterprises 60%

+

60,000

=

90,000

Common Stock 140,000

1/1/X5 Goodwill = 0

Identifiable excess =0

$90,000 Initial investment in Lowtide Builders

60% Book value = 90,000

Basic elimination entry Common stock Retained earnings Investment in Lowtide Builders NCI in NA of Lowtide Builders

140,000 10,000 90,000 60,000

Investment in Lowtide Builders Acquisition Price

90,000 90,000

Basic

0

5-17

+



E5-8 (continued) b. Elimination Entries

Glitter Enterprises

Lowtide Builders

80,000

30,000

110,000

Inventory

150,000

350,000

500,000

Buildings & Equipment (net)

430,000

80,000

510,000

DR

CR

Consolidated

Balance Sheet Cash and Receivables

Investment in Lowtide Builders

90,000

90,000

1,120,000

750,000

460,000

Current Liabilities

100,000

110,000

Long-Term Debt

400,000

200,000

Common Stock

200,000

140,000

140,000

200,000

50,000

10,000

10,000

50,000

210,000 600,000

NCI in NA of Lowtide Builders Total Liabilities & Equity

c.

0

Total Assets

Retained Earnings

0

90,000

750,000

460,000

150,000

60,000

60,000

60,000

1,120,000

Glitter Enterprises and Subsidiary Consolidated Balance Sheet January 1, 20X5 Cash and Receivables Inventory Buildings and Equipment (net) Total Assets

$ 110,000 500,000 510,000 $1,120,000

Current Liabilities Long-Term Debt Stockholders’ Equity: Controlling Interest: Common Stock Retained Earnings Total Controlling Interest Noncontrolling Interest Total Stockholders’ Equity Total Liabilities and Stockholders' Equity

$ 210,000 600,000

5-18

$200,000 50,000 $250,000 60,000

310,000 $1,120,000


E5-9 Multiple-Choice Questions on Balance Sheet Consolidation 1.

d

$215,000

=

$130,000 + $70,000 + ($85,000 - $70,000)

2.

c

$40,000

=

($150,500 + $64,500) - ($405,000 - $28,000 - $37,000 - $200,000) - $15,000 - $20,000

3.

b

$1,121,000

=

Total Assets of Power Corp. Less: Investment in Silk Corp. Book value of assets of Silk Corp. Book value reported by Power and Silk Increase in inventory ($85,000 - $70,000) Increase in land ($45,000 - $25,000) Goodwill Total assets reported

4.

d

$701,500

5.

d

$64,500

6.

d

7.

c

$ 791,500 (150,500) $ 641,000 405,000 $1,046,000 15,000 20,000 40,000 $1,121,000

=

($61,500 + $95,000 + $280,000) + ($28,000 + $37,000 + $200,000)

$205,000

=

The amount reported by Power Corporation

$419,500

=

($150,000 + $205,000) + $64,500

5-19


E5-10 Basic Consolidation Entries for Majority-Owned Subsidiary a. Equity Method Entries on Horrigan Corp.'s Books: Investment in Farmstead Co. 210,000 Cash Record the initial investment in Farmstead Co.

210,000

Investment in Farmstead Co. 14,000 Income from Farmstead Co. 14,000 Record Horrigan Corp.'s 70% share of Farmstead Co.'s 20X9 income Cash 3,500 Investment in Farmstead Co. 3,500 Record Horrigan Corp.'s 70% share of Farmstead Co.'s 20X9 dividend b. Book Value Calculations:

Original book value + Net Income - Dividends

NCI 30% 90,000 6,000 (1,500)

Ending book value

94,500

+

Horrigan Corp. 70% 210,000 14,000 (3,500) 220,500

=


200,000

1/1/X9

12/31/X9

Goodwill = 0

Goodwill = 0


70% Book value = 210,000

$210,000 Initial investment in Farmstead Co.

5-20

Excess = 0

70% Book value = 220,500

+

Retained Earnings 100,000 20,000 (5,000) 115,000

$220,500 Net investment in Farmstead Co.


E5-10 (continued) Basic elimination entry Common stock Retained earnings Income from Farmstead Co. NCI in NI of Farmstead Co. Dividends declared Investment in Farmstead Co. NCI in NA of Farmstead Co.

Acquisition Price 70% Net Income Ending Balance

Investment in Farmstead Co. 210,000 14,000 3,500 220,500 220,500

200,000 100,000 14,000 6,000 5,000 220,500 94,500 Income from Farmstead Co. 14,000

70% Net Income

14,000

Ending Balance

70% Dividends Basic

0

14,000 0

5-21


E5-11 Majority-Owned Subsidiary with Differential a. Equity Method Entries on West Corp.'s Books: Investment in Canton Corp. Cash Record the initial investment in Canton Corp.

133,500 133,500

Investment in Canton Corp. 22,500 Income from Canton Corp. Record West Corp.'s 75% share of Canton Corp.'s 20X3 income

22,500

Cash 9,000 Investment in Canton Corp. Record West Corp.'s 75% share of Canton Corp.'s 20X3 dividend

9,000

Income from Canton Corp. Investment in Canton Corp. Record amortization of excess acquisition price

3,000

3,000

b. Book Value Calculations:


NCI 25% 37,500 7,500 (3,000)

Ending book value

42,000

+

West Corp. 75% 112,500 22,500 (9,000)

=

126,000

Common Stock 60,000

+

Retained Earnings 90,000 30,000 (12,000)

60,000

1/1/X3

12/31/X3

Goodwill = 0

Goodwill = 0


Excess = 18,000

75% Book value = 112,500

$133,500 Initial investment in Canton Corp.

5-22

75% Book value = 126,000

108,000

$144,000 Net investment in Canton Corp.


E5-11 (continued) Basic elimination entry Common stock Retained earnings Income from Canton Corp. NCI in NI of Canton Corp. Dividends declared Investment in Canton Corp. NCI in NA of Canton Corp.

60,000 90,000 22,500 7,500 12,000 126,000 42,000

Excess Value (Differential) Calculations: NCI West Corp. 25% + 75% Beginning balance 7,000 21,000 Changes (1,000) (3,000) Ending balance 6,000 18,000

Amortized excess value reclassification entry: Depreciation expense Income from Canton Corp. NCI in NI of Canton Corp.

=

Equipment 28,000

+

28,000

Acc. Depr. 0 (4,000) (4,000)

4,000 3,000 1,000

Excess value (differential) reclassification entry: Equipment 28,000 Acc. Depr. 4,000 Investment in Canton Corp. 18,000 NCI in NA of Canton Corp. 6,000

Acquisition Price 75% Net Income

Ending Balance

Investment in Canton Corp. 133,500 22,500 9,000 3,000 144,000

Income from Canton Corp.

75% Dividends Excess Val. Amort.

126,000

Basic

18,000

Excess Reclass.

0

5-23

22,500

75% Net Income

19,500

Ending Balance

3,000 22,500 3,000 0


E5-12 Differential Assigned to Amortizable Asset a.

Lancaster Company’s common stock, January 1, 20X1 Lancaster Company’s retained earnings, January 1, 20X1 Book value of Lancaster’s net assets Proportion of stock acquired Book value of Lancaster's shares purchased by Major Corporation Excess of acquisition price over book value Fair value of consideration given Add: Share of Lancaster's net income ($60,000 x .90) Less: Amortization of patents ($40,000 / 5) x .90 Dividends paid by Lancaster ($20,000 x .90) Balance in investment account, December 31, 20X1

$120,000 380,000 $500,000 x .90 $450,000 36,000 $486,000 54,000 (7,200) (18,000) $514,800

b. Equity Method Entries on Major Corp.'s Books: Investment in Lancaster Co. Cash Record the initial investment in Lancaster Co.

486,000 486,000

Investment in Lancaster Co. 54,000 Income from Lancaster Co. 54,000 Record Major Corp.'s 90% share of Lancaster Co.'s 20X1 income Cash 18,000 Investment in Lancaster Co. 18,000 Record Major Corp.'s 90% share of Lancaster Co.'s 20X1 dividend Income from Lancaster Co. Investment in Lancaster Co. Record amortization of excess acquisition price

7,200 7,200

Book Value Calculations:


NCI 10% 50,000 6,000 (2,000)

Ending book value

54,000

+

Major Corp. 90% 450,000 54,000 (18,000)

=

486,000


120,000

5-24

+



E5-12 (continued) 1/1/X1

12/31/X1

Goodwill = 0

Goodwill = 0


Excess = 28,800

90% Book value = 450,000

Basic elimination entry Common stock Retained earnings Income from Lancaster Co. NCI in NI of Lancaster Co. Dividends declared Investment in Lancaster Co. NCI in NA of Lancaster Co.

$486,000 Initial investment in Lancaster Co.

90% Book value = 486,000

120,000 380,000 54,000 6,000

Excess Value (Differential) Calculations: NCI Major Corp. 10% + 90% Beginning balance 4,000 36,000 Changes (800) (7,200) Ending balance 3,200 28,800

20,000 486,000 54,000

=

Patents 40,000 (8,000) 32,000

Amortized excess value reclassification entry: Patents 8,000 Income from Lancaster Co. NCI in NI of Lancaster Co.

5-25

7,200 800

$514,800 Net investment in Lancaster Co.


E5-12 (continued) Excess value (differential) reclassification entry: Patents 32,000 Investment in Lancaster Co. NCI in NA of Lancaster Co.

28,800 3,200

Investment in Lancaster Co. Acquisition Price 90% Net Income

486,000 54,000 18,000 7,200

Ending Balance

Income from Lancaster Co.

90% Dividends Excess Val. Amort. Basic

28,800

Excess Reclass.

0

5-26

90% Net Income

46,800

Ending Balance

7,200

514,800 486,000

54,000

54,000 7,200 0


E5-13 Consolidation after One Year of Ownership a. Equity Method Entries on Pioneer Corp.'s Books: Investment in Lowe Corp. 190,000 Cash Record the initial investment in Lowe Corp.

190,000


40,000

+

Pioneer Corp. 80%

=

160,000

Common Stock

+

120,000


1/1/X2 Goodwill = 4,400


80% Book value = 160,000

Basic elimination entry Common stock Retained earnings Investment in Lowe Corp. NCI in NA of Lowe Corp.

$190,000 Initial investment in Lowe Corp.

120,000 80,000 160,000 40,000

Excess Value (Differential) Calculations: NCI Pioneer Corp. 20% + 80% Beginning balances 7,500 30,000

5-27

=

Buildings 32,000

+

Goodwill 5,500


E5-13 (continued) Excess value (differential) reclassification entry: Buildings 32,000 Goodwill 5,500 Investment in Lowe Corp. NCI in NA of Lowe Corp.

Acquisition Price

Investment in Lowe Corp. 190,000 160,000 30,000 0

30,000 7,500


b. Equity Method Entries on Pioneer Corp.'s Books: Investment in Lowe Corp. 190,000 Cash Record the initial investment in Lowe Corp.

190,000

Investment in Lowe Corp. 32,000 Income from Lowe Corp. 32,000 Record Pioneer Corp.'s 80% share of Lowe Corp.'s 20X2 income 3,20 Income from Lowe Corp. Investment in Lowe Corp. Record amortization of excess acquisition price

0 3,200



NCI 20% 40,000 8,000 0

Ending book value

48,000

+

Pioneer Corp. 80% 160,000 32,000 0

=

192,000


120,000

5-28

+

Retained Earnings 80,000 40,000 0 120,000



12/31/X2

Goodwill = 4,400

Goodwill = 4,400


Excess = 22,400

80% Book value = 160,000

Basic elimination entry Common stock Retained earnings Income from Lowe Corp. NCI in NI of Lowe Corp. Investment in Lowe Corp. NCI in NA of Lowe Corp.

$190,000 Initial investment in Lowe Corp.

80% Book value = 192,000

120,000 80,000 32,000 8,000 192,000 48,000

Excess Value (Differential) Calculations: NCI Pioneer 20% + Corp. 80% Beginning balance 7,500 30,000 Changes (800) (3,200) Ending balance 6,700 26,800

=

Buildings 32,000 32,000

Amortized excess value reclassification entry: Depreciation expense 4,000 Income from Lowe Corp. NCI in NI of Lowe Corp. Excess value (differential) reclassification entry: Buildings Goodwill Acc. Depr. Investment in Lowe Corp. NCI in NA of Lowe Corp.

$218,800 Net investment in Lowe Corp.

3,200 800

32,000 5,500 4,000 26,800 6,700

5-29

+

Acc. Depr. 0 (4,000) (4,000)

+

Goodwill 5,500 0 5,500

Chapter 05 - Consolidation of Less-than-Wholly-Owned Subsidiaries Acquired at More than Book Value E5-13 (continued)


Investment in Lowe Corp. 190,000 32,000 3,200 218,800

Income from Lowe Corp.

Excess Val. Amort.

192,000

Basic

26,800

Excess Reclass.

32,000

80% Net Income

28,800

Ending Balance

3,200 32,000 3,200 0

0

E5-14 Consolidation Following Three Years of Ownership a.

Computation of increase in value of patents: Fair value of consideration given by Knox Fair value of noncontrolling interest Total fair value Book value of Conway stock Excess of fair value over book value Increase in value of land ($30,000 - $22,500) Increase in value of equipment ($360,000 - $320,000) Increase In value of patents

$277,500 185,000 $462,500 (400,000) $ 62,500 (7,500) (40,000) $ 15,000

b. Equity Method Entries on Knox Corp.'s Books: Investment in Conway Corp. Cash Record the initial investment in Conway Corp.

277,500 277,500


160,000

+

Knox Corp. 60%

=

240,000

Common Stock 50,000

5-30

+



1/1/X7 Goodwill = 0


$277,500 Net investment in Conway Corp.

60% Book value = 240,000

Basic elimination entry Common stock Retained earnings Investment in Conway Corp. NCI in NA of Conway Corp.

250,000 150,000 240,000 160,000

Excess Value (Differential) Calculations: NCI Knox Corp. 40% + 60% Beginning balances 25,000 37,500 Excess value (differential) reclassification entry: Land Equipment Patent Investment in Conway Corp. NCI in NA of Conway Corp.

=

Land 7,500

7,500 40,000 15,000 37,500 25,000

Investment in Conway Corp. Acquisition Price

277,500 240,000 37,500

+


0

5-31

Equipment 40,000

+

Patent 15,000


E5-14 (continued)

c. Computation of investment account balance at January 1, 20X9: Fair value of consideration given Undistributed income since acquisition ($100,000 - $60,000) x .60 Amortization of differential assigned to: Equipment ($40,000 / 8) x .60 x 2 years Patents ($15,000 / 10) x .60 x 2 years Account balance at January 1, 20X9

$277,500 24,000 (6,000) (1,800) $293,700

d. Equity Method Entries on Knox Corp.'s Books: Investment in Conway Corp. 18,000 Income from Conway Corp. 18,000 Record Knox Corp.'s 60% share of Conway Corp.'s 20X7 income Cash 6,000 Investment in Conway Corp. 6,000 Record Knox Corp.'s 60% share of Conway Corp.'s 20X7 dividend Income from Conway Corp. Investment in Conway Corp. Record amortization of excess acquisition price

3,900 3,900

e. Book Value Calculations:


NCI 40% 176,000 12,000 (4,000)

Ending book value

184,000

+

Knox Corp. 60% 264,000 18,000 (6,000) 276,000

5-32

=


250,000

+




12/31/X7

Goodwill = 0

Goodwill = 0


Excess = 25,800

60% Book value = 264,000

$293,700 Initial investment in Conway Corp.

Basic elimination entry Common stock Retained earnings Income from Conway Corp. NCI in NI of Conway Corp. Dividends declared Investment in Conway Corp. NCI in NA of Conway Corp. Excess Value (Differential) Calculations: Knox NCI Corp. 40% + 60% Beginning balance 19,800 29,700 Changes (2,600) (3,900) Ending balance 17,200 25,800

$301,800 Net investment in Conway Corp.

60% Book value = 276,000

250,000 190,000 18,000 12,000 10,000 276,000 184,000

=

Land

+

7,500 0 7,500

Amortized excess value reclassification entry: Amortization Expense Depreciation expense Income from Conway Corp. NCI in NI of Conway Corp.

Equipment 40,000 40,000

1,500 5,000 3,900 2,600

5-33

+

Patent 12,000 (1,500) 10,500

+

Acc. Depr. (10,000) (5,000) (15,000)


Excess value (differential) reclassification entry: Land Equipment Patent Acc. Depr. Investment in Conway Corp. NCI in NA of Conway Corp.

7,500 40,000 10,500 15,000 25,800 17,200

E5-15 Consolidation Worksheet for Majority-Owned Subsidiary a. Equity Method Entries on Proud Corp.'s Books: Investment in Stergis Co. Cash Record the initial investment in Stergis Co.

120,000 120,000

Investment in Stergis Co. 24,000 Income from Stergis Co. Record Proud Corp.'s 80% share of Stergis Co.'s 20X3 income

24,000

Cash 8,000 Investment in Stergis Co. Record Proud Corp.'s 80% share of Stergis Co.'s 20X3 dividend

8,000



NCI 20% 30,000 6,000 (2,000)

Ending book value

34,000

+

Proud Corp. 80% 120,000 24,000 (8,000) 136,000

5-34

=


100,000

+




12/31/X3

Goodwill = 0

Goodwill = 0


Excess = 0 $120,000 Initial investment in Stergis Co.

80% Book value = 120,000

Basic elimination entry Common stock Retained earnings Income from Stergis Co. NCI in NI of Stergis Co. Dividends declared Investment in Stergis Co. NCI in NA of Stergis Co.


$136,000 Net investment in Stergis Co.

80% Book value = 136,000

100,000 50,000 24,000 6,000 10,000 136,000 34,000

Investment in Stergis Co. 120,000 24,000 8,000 136,000 136,000

Income from Stergis Co. 24,000

80% Net Income

24,000

Ending Balance

80% Dividends Basic

0

24,000 0

Optional accumulated depreciation elimination entry Accumulated depreciation 60,000 Depreciable Assets 60,000

5-35


Proud Corp.

Stergis Co.

Sales

200,000

120,000

320,000

Less: Depreciation Expense

(25,000)

(15,000)

(40,000)

(105,000)

(75,000)

DR

CR

Consolidated

Income Statement

Less: Other Expenses Income from Stergis Co.

24,000

Consolidated Net Income

94,000

NCI in Net Income Controlling Interest in Net Income

30,000

(180,000) 24,000

0

24,000

100,000

6,000

(6,000)

94,000

30,000

30,000

230,000

50,000

50,000

94,000

30,000

30,000

Less: Dividends Declared

(40,000)

(10,000)

Ending Balance

284,000

70,000

Current Assets

173,000

105,000

Depreciable Assets

500,000

300,000

(175,000)

(75,000)

0

94,000

Statement of Retained Earnings Beginning Balance Net Income

80,000

230,000 0

94,000

10,000

(40,000)

10,000

284,000

Balance Sheet

Less: Accumulated Depreciation

278,000 60,000 60,000

740,000 (190,000)

Investment in Stergis Co.

136,000

Total Assets

634,000

330,000

Current Liabilities

50,000

40,000

90,000

Long-Term Debt

100,000

120,000

220,000

Common Stock

200,000

100,000

100,000

Retained Earnings

284,000

70,000

80,000

60,000

NCI in NA of Stergis Co. Total Liabilities & Equity

634,000

330,000

180,000

136,000

0

60,000

828,000

200,000 10,000

284,000

34,000

34,000

44,000

828,000

E5-15 (continued)

c.

Proud Corporation and Subsidiary Consolidated Balance Sheet December 31, 20X3

Current Assets Depreciable Assets Less: Accumulated Depreciation Total Assets Current Liabilities Long-Term Debt Stockholders’ Equity: Controlling Interest: Common Stock Retained Earnings Total Controlling Interest Noncontrolling Interest Total Stockholders’ Equity Total Liabilities and Stockholders' Equity

$740,000 (190,000)

$278,000 550,000 $828,000 $ 90,000 220,000

$200,000 284,000 $484,000 34,000

518,000 $828,000

Proud Corporation and Subsidiary Consolidated Income Statement Year Ended December 31, 20X3 Sales Depreciation Other Expenses Total Expenses Consolidated Net Income Income to Noncontrolling Interest Income to Controlling Interest

$ 40,000 180,000

$320,000 (220,000) $100,000 (6,000) $ 94,000

Proud Corporation and Subsidiary Consolidated Retained Earnings Statement Year Ended December 31, 20X3 Retained Earnings, January 1, 20X3 Income to Controlling Interest, 20X3 Dividends Declared, 20X3 Retained Earnings, December 31, 20X3

$230,000 94,000 $324,000 (40,000) $284,000

E5-16 Consolidation Worksheet for Majority-Owned Subsidiary for Second Year a. Equity Method Entries on Proud Corp.'s Books: Investment in Stergis Co. 28,000 Income from Stergis Co. 28,000 Record Proud Corp.'s 80% share of Stergis Co.'s 20X4 income Cash 12,000 Investment in Stergis Co. 12,000 Record Proud Corp.'s 80% share of Stergis Co.'s 20X4 dividend Book Value Calculations:


NCI 20% 34,000 7,000 (3,000)

Ending book value

38,000

+

Proud Corp. 80% 136,000 28,000 (12,000) 152,000

=


+

100,000

1/1/X4

12/31/X4

Goodwill = 0

Goodwill = 0


Excess = 0

80% Book value = 136,000


80% Book value = 152,000



E5-16 (continued) Basic elimination entry Common stock Retained earnings Income from Stergis Co. NCI in NI of Stergis Co. Dividends declared Investment in Stergis Co. NCI in NA of Stergis Co.

Beginning Balance 80% Net Income Ending Balance

Investment in Stergis Co. 136,000 28,000 12,000 152,000 152,000 0

100,000 70,000 28,000 7,000 15,000 152,000 38,000 Income from Stergis Co. 28,000

80% Net Income

28,000

Ending Balance

80% Dividends Basic

Optional accumulated depreciation elimination entry Accumulated depreciation 60,000 Depreciable Assets 60,000

28,000 0


Proud Corp.

Stergis Co.

230,000

140,000

(25,000)

(15,000)

(40,000)

(150,000)

(90,000)

(240,000)

DR

CR

Consolidated

Income Statement Sales Less: Depreciation Expense Less: Other Expenses Income from Stergis Co.

28,000


83,000

35,000


370,000

28,000

0

28,000

90,000

7,000

(7,000)

83,000

35,000

35,000

284,000

70,000

70,000 35,000

0

83,000


83,000

35,000


(50,000)

(15,000)

Ending Balance

317,000

90,000

Current Assets

235,000

150,000

Depreciable Assets

500,000

300,000

(200,000)

(90,000)

105,000

284,000 0

83,000

15,000

(50,000)

15,000

317,000

Balance Sheet

Less: Accumulated Depreciation Investment in Stergis Co.

152,000

Total Assets

687,000

360,000

385,000 60,000 60,000 60,000

740,000 (230,000)

152,000

0

60,000

895,000

Current Liabilities

70,000

50,000

120,000

Long-Term Debt

100,000

120,000

220,000

Common Stock

200,000

100,000

100,000

Retained Earnings

317,000

90,000

105,000

NCI in NA of Stergis Co. Total Liabilities & Equity

687,000

360,000

205,000

200,000 15,000

317,000

38,000

38,000

53,000

895,000

E5-17 Preparation of Stockholders' Equity Section with Other Comprehensive Income a.

Consolidated net income: Operating income of Broadmore Net income of Stem Amortization of differential ($580,000 - $500,000) / 10 Years Consolidated net income Comprehensive gain reported by Stem Consolidated comprehensive income

b.

Comprehensive income attributable to controlling interest: Consolidated comprehensive income Comprehensive income attributable to Noncontrolling interest ($50,000 - $8,000) x .25 ($65,000 - $8,000) x .25 Comprehensive income attributable to controlling interest

c.

Consolidated stockholders' equity: Controlling Interest: Common Stock Retained Earnings Accumulated Other Comprehensive Income Total Controlling Interest Noncontrolling Interest Total Stockholders’ Equity

20X8 20X9 $120,000 $ 140,000 40,000 60,000 (8,000) (8,000) $152,000 $ 192,000 10,000 5,000 $162,000 $ 197,000

20X8 20X9 $162,000 $ 197,000 (10,500)

(14,250) $151,500 $ 182,750

20X8

20X9

$320,000 $ 320,000 504,000 613,000 7,500 11,250 831,500 944,250 151,750 158,500 $983,250 $1,102,750

E5-18 Eliminating Entries for Subsidiary with Other Comprehensive Income a. Equity Method Entries on Palmer Corp.'s Books: Investment in Krown Corp. Cash Record the initial investment in Krown Corp.

140,000 140,000

Investment in Krown Corp. 21,000 Income from Krown Corp. 21,000 Record Palmer Corp.'s 70% share of Krown Corp.'s 20X8 income Cash 17,500 Investment in Krown Corp. 17,500 Record Palmer Corp.'s 70% share of Krown Corp.'s 20X8 dividend Investment in Krown Corp. 4,200 Other Comprehensive Income from Krown Corp. 4,200 Record Palmer Corp.'s proportionate share of OCI from Krown Corp. Book Value Calculations:


NCI 30% 60,000 9,000 (7,500)

Ending book value

61,500

+

Palmer Corp. 70% 140,000 21,000 (17,500) 143,500

=


+

120,000

1/1/X8

12/31/X8

Goodwill = 0

Goodwill = 0


Excess = 0

70% Book value = 140,000

$140,000 Initial investment in Krown Corp.

70% Book value = 147,700


$147,700 Net investment in Krown Corp.

E5-18 (continued) Basic elimination entry Common stock Retained earnings Income from Krown Corp. NCI in NI of Krown Corp. Dividends declared Investment in Krown Corp. NCI in NA of Krown Corp. Other Comprehensive Income Entry: OCI from Krown Corp. OCI to the NCI Investment in Krown Corp. NCI in NA of Krown Corp.


Ending Balance

Investment in Krown Corp. 140,000 21,000 17,500 4,200 147,700 143,500 4,200 0

120,000 80,000 21,000 9,000 25,000 143,500 61,500

4,200 1,800 4,200 1,800 Income from Krown Corp. 21,000 70% Dividends 70% OCI 21,000 Basic OCI Entry

21,000 0

E5-19* Consolidation of Subsidiary with Negative Retained Earnings Equity Method Entries on General Corp.'s Books: Investment in Strap Co. 138,000 Cash Record the initial investment in Strap Co.

138,000


29,000

+

General Corp. 80%

Retained =

116,000

Common Stock

+

100,000

1/1/X4 Goodwill = 22,000


80% Book value = 116,000

Basic elimination entry Common stock Additional Paid-in Capital Retained earnings Investment in Strap Co. NCI in NA of Strap Co.

$138,000 Initial investment in Strap Co.

100,000 75,000 30,000 116,000 29,000

Add. Paidin Capital 75,000

+ Earnings (30,000)

E5-19* (continued) Excess Value (Differential) Calculations: NCI General Corp. 20% + 80% Beginning balances 5,500 22,000

=

Goodwill 27,500

Excess value (differential) reclassification entry: Goodwill 27,500 Investment in Strap Co. NCI in NA of Strap Co.

22,000 5,500

Investment in Strap Co. Acquisition Price

138,000 116,000 22,000


0

E5-20* Complex Assignment of Differential a. Equity Method Entries on Worth Corp.'s Books: Investment in Brinker Inc. Cash Record the initial investment in Brinker Inc.

864,000 864,000

Investment in Brinker Inc. 135,000 Income from Brinker Inc. Record Worth Corp.'s 90% share of Brinker Inc.'s 20X5 income Income from Brinker Inc. Investment in Brinker Inc. Record amortization of excess acquisition price

135,000

82,350 82,350



NCI 10% 72,000 15,000 0

Ending book value

87,000

+

Worth Corp. 90% 648,000 135,000 0 783,000

=


Premium on Com. Stock 100,000

+

500,000

100,000

Retained + Earnings 120,000 150,000 0 270,000

E5-20* (continued) 12/1/X5

12/31/X5

Goodwill = 45,000

Goodwill = 45,000


Excess = 88,650

90% Book value = 648,000

Basic elimination entry Common stock Premium on common stock Retained earnings Income from Brinker Inc. NCI in NI of Brinker Inc. Investment in Brinker Inc. NCI in NA of Brinker Inc.

$864,000 Initial investment in Brinker Inc.

90% Book value = 783,000

500,000 100,000 120,000 135,000 15,000 783,000 87,000

$916,650 Net investment in Brinker Inc.

Excess Value (Differential) Calculations: NCI 10% Beg. balance Changes End. balance

+

Worth Corp. 90%

=

Inventory

+

Land

24,000

216,000

5,000

75,000

(9,150)

(82,350)

(5,000)

(75,000)

14,850

133,650

0

Amortized excess value reclassification entry: Cost of goods sold Gain on sale of land Interest expense Depreciation expense Income from Brinker Inc. NCI in NI of Brinker Inc.

+

0

Equipment

+

60,000

60,000

Disc. on notes payable

+

Acc. Depr. 0

50,000

(7,500)

(4,000)

0

42,500

(4,000)

50,000

5,000 75,000 7,500 4,000 82,350 9,150

60,000 42,500 50,000 4,000 133,650 14,850

SOLUTIONS TO PROBLEMS P5-21 Multiple-Choice Questions on Applying the Equity Method [AICPA Adapted] 1. a 2. a 3. c 4. d

Goodwill

50,000

E5-20* (continued) Excess value (differential) reclassification entry: Equipment Discount on notes payable Goodwill Acc. Depr. Investment in Brinker Inc. NCI in NA of Brinker Inc.

+

P5-22 Amortization of Differential Journal entries recorded by Ball Corporation: Equity Method Entries on Ball Corp.'s Books: Investment in Krown Corp. Preferred Stock Additional Paid-in Capital Record the initial investment in Krown Corp.

120,000 50,000 70,000

Investment in Krown Corp. 12,000 Income from Krown Corp. Record Ball Corp.'s 30% share of Krown Corp.'s 20X5 income Cash

12,000

3,000

Investment in Krown Corp. Record Ball Corp.'s 30% share of Krown Corp.'s 20X5 dividend Income from Krown Corp. Investment in Krown Corp. Record amortization of excess acquisition price

3,000

4,575 4,575

P5-22 (continued) Amortization of differential assigned to buildings and equipment: Fair value of buildings and equipment $360,000 Book value of buildings and equipment 300,000 Differential $60,000 Portion of stock held by Ball x 0.30 Differential assigned to buildings and equipment $18,000 Remaining life ÷ 15 Yearly amortization $1,200 Amortization of differential assigned to copyrights: Purchase price Fair value of Krown's: Total assets $560,000 Total liabilities (250,000) $310,000 Proportion of stock held by Ball x .30 Amount assigned to copyrights Remaining life ÷ Yearly amortization

5-48

$120,000

(93,000) $27,000 8 $3,375

P5-23 Computation of Account Balances a.

Easy Chair Company 20X1 equity-method income: Proportionate share of reported income ($30,000 x .40) Amortization of differential assigned to: Buildings and equipment [($35,000 x .40) / 5 years] Goodwill ($8,000: not impaired) Investment Income Assignment of differential Purchase price Proportionate share of book value of net assets ($320,000 x .40) Proportionate share of fair value increase in buildings and equipment ($35,000 x .40) Goodwill

$ 12,000 (2,800) -0$ 9,200 $150,000 (128,000) $

(14,000) 8,000

b.

Dividend income, 20X1 ($9,000 x .40)

$

3,600

c.

Cost-method account balance (unchanged):

$150,000

Equity-method account balance: Balance, January 1, 20X1 Investment income Dividends received Balance, December 31, 20X1

$150,000 9,200 (3,600) $155,600

P5-24 Multistep Acquisition Journal entries recorded by Jackson Corp. in 20X9: (1) Investment in Phillips Corp. Stock Cash Record purchase of Phillips stock.

70,000

(2) Investment in Phillips Corp. Stock Retained Earnings Record pick-up of difference between cost and equity income.

14,500

Computation of equity pick-up 20X6 .10($70,000 - $20,000) 20X7 .10($70,000 - $20,000) 20X8 .15($70,000 - $20,000) 20X6 amortization of differential 20X7 amortization of differential 20X8 amortization of differential Amount of increase

$ 5,000 5,000 7,500 (1,000) (1,000) (1,000) $14,500

5-49

70,000

14,500

Amortization of differential 20X6 purchase [$25,000 - ($200,000 x .10)] 5 years 20X8 purchase [$15,000 - ($300,000 x .05)] 20X9 purchase [$70,000 - ($350,000 x .20)] Total annual amortization (3) Cash Investment in Phillips Corp. Stock Record dividend from Phillips Corp: $20,000 x .35 (4) Investment in Phillips Corp. Stock Income from Phillips Corp. Record equity-method income: $70,000 x .35

$1,000 0 0 $1,000 7,000

24,500

(5) Income from Phillips Corp. Investment in Phillips Corp. Stock Amortize differential.

5-50

1,000

7,000

24,500

1,000

P5-25 Complex Differential a. Essex Company 20X2 equity-method income: Proportionate share of reported net income ($80,000 x .30) Deduct increase in cost of goods sold for purchase differential assigned to inventory ($30,000 x .30) Deduct amortization of differential assigned to: Buildings and equipment [($320,000 - $260,000) x .30] / 12 years] Patent [($25,000 x .30) / 10 years] Equity-method income for 20X2

$24,000 (9,000) (1,500) (750) $12,750

b. Computation of investment account balance on December 31, 20X2: Purchase Price Investment income for 20X2 Dividends received in 20X2 ($9,000 x .30) Investment account balance on December 31, 20X2

$12,750 (2,700)

$165,000 10,050 $175,050

P5-26 Equity Entries with Differential a. Journal entry recorded by Hunter Corporation: Investment in Arrow Manufacturing Common Stock Additional Paid-In Capital Record acquisition of Arrow Manufacturing stock. b.

210,000

60,000 150,000

Equity-method journal entries recorded by Hunter Corporation in 20X0: (1) Investment in Arrow Manufacturing Stock Common Stock Additional Paid-In Capital Record acquisition of Arrow Manufacturing stock.

210,000

(2) Cash 9,000 Investment in Arrow Manufacturing Stock Record dividends from Arrow Manufacturing: $20,000 x 0.45 (3) Investment in Arrow Manufacturing Stock Income from Arrow Manufacturing Record equity-method income: $80,000 x 0.45

36,000

(4) Income from Arrow Manufacturing 1,350 Investment in Arrow Manufacturing Stock Amortize differential assigned to buildings and equipment: ($30,000 x .45) / 10 years

5-51

60,000 150,000

9,000

36,000

1,350

P5-26 (continued) Equity-method journal entries recorded by Hunter Corporation in 20X1: (1) Cash 18,000 Investment in Arrow Manufacturing Stock Record dividends from Arrow Manufacturing: $40,000 x 0.45

18,000

(2) Investment in Arrow Manufacturing Stock 22,500 Income from Arrow Manufacturing Record equity-method income for period: $50,000 x 0.45

22,500

(3) Income from Arrow Manufacturing 1,350 Investment in Arrow Manufacturing Stock Amortize differential assigned to buildings and equipment.

1,350

c. Investment account balance, December 31, 20X1: Purchase price on January 1, 20X0 20X0: Income from Arrow Manufacturing ($36,000 - $1,350) Dividends received 20X1: Income from Arrow Manufacturing ($22,500 - $1,350) Dividends received Investment account balance, December 31, 20X1

5-52

$210,000 $34,650 (9,000) $21,150 (18,000)

25,650 3,150 $238,800

P5-27 Equity Entries with Differential a. Equity-method journal entries recorded by Ennis Corporation: (1) Investment in Jackson Corporation Stock Common Stock Additional Paid-In Capital Record acquisition of Jackson Corporation stock.

200,000

50,000 150,000

(2) Cash 3,500 Investment in Jackson Corporation Stock Record dividend from Jackson Corporation: $10,000 x 0.35 (3) Investment in Jackson Corporation Stock Income from Jackson Corporation Record equity-method income: $70,000 x 0.35

3,500

24,500

24,500

(4) Income from Jackson Corporation 7,000 Investment in Jackson Corporation Stock Record expiration of differential assigned to inventory: $20,000 x 0.35

7,000

(5) Income from Jackson Corporation 1,400 Investment in Jackson Corporation Stock 1,400 Record amortization of differential assigned to buildings and equipment (net): ($80,000 x .35) / 20 years b. $212,600 = $200,000 + $24,500 - $3,500 - $7,000 - $1,400 P5-28 Additional Ownership Level a.

Operating income of Amber for 20X3 Operating income of Blair for 20X3 Add: Equity income from Carmen [($50,000 - $6,000) x .25) Blair net income for 20X3 Proportion of stock held by Amber Amortization of differential: Equipment [($30,000 x .40) / 8 years] Patents [($25,000 x .40) / 5 years) Net income of Amber for 20X3

$100,000 11,000 $111,000 x 0.40

$220,000

44,400 (1,500) (2,000) $260,900

5-53

b.

Investment in Blair Corporation Stock Common Stock Additional paid-In Capital Purchase of Blair Corporation Stock.

130,000

Cash Investment in Blair Corporation Stock Record dividend from Blair: $30,000 x 0.40

12,000

Investment in Blair Corporation Stock Income from Blair Corporation Record equity-method income: $111,000 x 0.40

44,400

Income from Blair Corporation Investment in Blair Corporation Stock Amortize differential: $3,500 = $1,500 + $2,000

3,500

5-54

40,000 90,000

12,000

44,400

3,500

P5-29 Correction of Error Required correcting entry: Retained Earnings Income from Dale Company Investment in Dale Company Stock Adjustments to current books of Hill Company: Retained Earnings 1/1/20X4

Item Adjustment to remove dividends included in investment income and not removed from investment account

$(14,000)

Adjustment to annual amortization of differential: 20X2 and 20X3 20X4 Required adjustment to account balance

(3,000) $(17,000)

17,000 11,500

28,500

Dale Company Investment 20X4 Balance Income 12/31/20X4 $(10,000)

$(24,000)

(1,500) $(11,500)

(3,000) (1,500) $(28,500)

Computation of adjustment to annual amortization of differential Correct amortization of differential assigned to: Equipment [($120,000 - $70,000) x 0.40] / 5 years Patents: Amount paid Fair value of identifiable net assets ($300,000 + $50,000) x 0.40 Amount assigned Number of years to be amortized Annual amortization Correct amount to be amortized annually Amount amortized by Hill [($164,000 - ($300,000 x 0.40)] / 8 years Adjustment to annual amortization

5-55

$4,000 $164,000 (140,000) $ 24,000 ÷ 8

3,000 $7,000 (5,500) $1,500

P5-30 Majority-Owned Subsidiary Acquired at Book Value a. Equity Method Entries on Cameron Corp.'s Books: Investment in Darla Corp. 87,500 Cash Record the initial investment in Darla Corp.

87,500


+

Cameron Corp. 70%

37,500

=

87,500

Common Stock 40,000



$87,500 Initial investment in Darla Corp.

70% Book value = 87,500

Basic elimination entry Common stock Retained earnings Investment in Darla Corp. NCI in NA of Darla Corp.

Acquisition Price

Investment in Darla Corp. 87,500 87,500 0

40,000 85,000 87,500 37,500

Basic

5-56

+


Eliminate intercompany accounts: Accounts payable Accounts receivable

12,500 12,500

P5-30 (continued) Optional accumulated depreciation elimination entry Accumulated depreciation 80,000 Building & equipment 80,000 b. Cameron Corp.

Darla Corp.

65,000

21,000


CR

Consolidated

Balance Sheet Cash Accounts Receivable Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Darla Corp.

86,000

90,000

44,000

130,000

75,000

12,500

205,000

60,000

30,000

90,000

410,000

250,000

(150,000)

(80,000)

80,000 80,000

87,500

121,500

580,000 (150,000)

87,500

0

180,000

932,500

Total Assets

692,500

340,000

80,000

Accounts Payable

152,500

35,000

12,500

Mortage Payable

250,000

180,000

80,000

40,000

40,000

80,000

210,000

85,000

85,000

210,000

Common Stock Retained Earnings

430,000

NCI in NA of Darla Corp. Total Liabilities & Equity

692,500

340,000

5-57

175,000

137,500

37,500

37,500

37,500

932,500

c.

Cameron Corporation and Subsidiary Consolidated Balance Sheet December 31, 20X4 Cash Accounts Receivable Inventory Land Buildings and Equipment

$660,000

Less: Accumulated Depreciation Total Assets

(230,000)

Accounts Payable Mortgage Payable Stockholders’ Equity: Controlling Interest: Common Stock $ 80,000 Retained Earnings 210,000 Total Controlling Interest $290,000 Noncontrolling Interest 37,500 Total Stockholder’s equity Total Liabilities and Stockholders' Equity P5-31 Majority-Owned Subsidiary Acquired at Greater than Book Value a. Equity Method Entries on Porter Corp.'s Books: Investment in Darla Corp. Cash Record the initial investment in Darla Corp.

102,200 102,200


37,500

+

Porter Corp. 70%

=

87,500

Common Stock 40,000

5-58

+


$ 86,000 121,500 205,000 90,000 430,000 $932,500 $175,000 430,000

327,500 $932,500

1/1/X4 Goodwill = 0


70% Book value = 87,500

Basic elimination entry Common stock Retained earnings Investment in Darla Corp. NCI in NA of Darla Corp.

$102,200 Initial investment in Darla Corp.

40,000 85,000 87,500 37,500

Excess Value (Differential) Calculations: NCI Porter Corp. 30% + 70% Beginning balances 6,300 14,700

5-59

=

Inventory 6,000

+


P5-31 (continued) Excess value (differential) reclassification entry: Inventory 6,000 Buildings & Equipment 15,000 Investment in Darla Corp. NCI in NA of Darla Corp.

14,700 6,300

Eliminate intercompany accounts: Accounts Payable Accounts Receivable

12,500

12,500


Acquisition Price

Investment in Darla Corp. 102,200 87,500 14,700 0

80,000


5-60

P5-31 (continued) Elimination Entries Porter Corp.

Darla Corp.

Cash

50,300

21,000

Accounts Receivable

90,000

44,000

130,000

75,000

DR

CR

Consolidate d

Balance Sheet

Inventory Land

60,000

30,000

Buildings & Equipment Less: Accumulated Depreciation

410,000 (150,000 )

250,000 (80,000 )

Investment in Darla Corp.

102,200

71,300 12,500 6,000

121,500 211,000 90,000

15,000

80,000

80,000

595,000 (150,000)

87,500

0

14,700 180,00 0

938,800

Total Assets

692,500

340,000

101,00 0

Accounts Payable

152,500

35,000

12,500

Mortgage Payable

250,000

180,000

80,000

40,000

40,000

80,000

210,000

85,000

85,000

210,000

Common Stock Retained Earnings

175,000 430,000

NCI in NA of Darla Corp.

37,500

43,800


692,500

340,000

5-61

137,50 0

37,500

938,800

c.

Porter Corporation and Subsidiary Consolidated Balance Sheet December 31, 20X4 Cash Accounts Receivable Inventory Land Buildings and Equipment Less: Accumulated Depreciation Total Assets

$595,000 (150,000)

Accounts Payable Mortgage Payable Stockholders’ Equity: Controlling Interest: Common Stock Retained Earnings Total Controlling Interest Noncontrolling Interest Total Stockholders’ Equity Total Liabilities and Stockholders' Equity

$ 80,000 210,000 $290,000 43,800

a. 510,000 500,000 10,000

5-62

445,000 $938,800 $175,000 430,000

P5-32 Balance Sheet Consolidation of Majority-Owned Subsidiary

Equity Method Entries on Total Corp.'s Books: Investment in Ticken Tie Co. Bonds Payable Bond Premium Record the initial investment in Ticken Tie Co.

$ 71,300 121,500 211,000 90,000

333,800 $938,800

b. Book Value Calculations: NCI 25% Ending book value

119,500

+

Total Corp. 75%

Retained =

358,500

Common Stock

+

200,000

1/1/X8 Goodwill = 66,000


75% Book value = 358,500

Basic elimination entry Common stock Additional Paid-in Capital Retained earnings Investment in Ticken Tie Co. NCI in NA of Ticken Tie Co.

$510,000 Initial investment in Ticken Tie Co.

200,000 130,000 148,000 358,500 119,500

5-63

Add. Paidin Capital 130,000

+ Earnings 148,000

P5-32 (continued) Excess Value (Differential) Calculations: Total NCI Corp. Inven25% + 75% = tory Beg. balances 50,500 151,500 4,000

+

Land 20,000

Excess value (differential) reclassification entry: Inventory Land Building & Equipment Patent Goodwill Investment in Ticken Tie Co. NCI in NA of Ticken Tie Co. Eliminate intercompany accounts: Current payables Receivables

Acquisition Price

Building & Equipment 50,000

4,000 20,000 50,000 40,000 88,000 151,500 50,500

6,500 6,500

Optional accumulated depreciation elimination entry Accumulated depreciation 220,000 Building & equipment Investment in Ticken Tie Co. 510,000 358,500 151,500 0

+

220,000


5-64

+

Patent 40,000

+

Goodwill 88,000

P5-32 (continued) c. Balance Sheet Cash Receivables Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Ticken Tie Co. Patent Goodwill Total Assets

d.

Total Corp.

Ticken Tie Co.

12,000 39,000 86,000 55,000 960,000 (411,000) 510,000

9,000 30,000 68,000 50,000 670,000 (220,000)

Elimination Entries DR CR 6,500 4,000 20,000 50,000 220,000

220,000 358,500 151,500

40,000 88,000 294,000

1,251,000

607,000

Current Payables Bonds Payable Bond Premium Common Stock Additional Paid-in Capital Retained Earnings NCI in NA of Ticken Tie Co.

38,000 700,000 10,000 300,000 100,000 103,000

29,000 100,000

6,500

200,000 130,000 148,000

200,000 130,000 148,000


1,251,000

607,000

484,500

585,000

119,500 50,500 119,500

Consolidated 21,000 62,500 158,000 125,000 1,460,000 (411,000) 0 40,000 88,000 1,543,500 60,500 800,000 10,000 300,000 100,000 103,000 170,000 1,543,500

Total Corporation and Subsidiary Consolidated Balance Sheet January 2, 20X8 Cash Receivables Less: Allowance for Bad Debts Inventory Land Buildings and Equipment Less: Accumulated Depreciation Patent Goodwill Total Assets

$

65,500 (3,000)

$1,460,000 (411,000)

Current Payables Bonds Payable Premium on Bonds Payable Stockholders’ Equity: Controlling Interest: Common Stock Additional Paid-In Capital Retained Earnings Total Controlling Interest Noncontrolling Interest Total Stockholders’ Equity Total Liabilities and

$ 800,000 10,000 $ 300,000 100,000 103,000 $ 503,000 170,000

5-65

$

21,000 62,500 158,000 125,000

1,049,000 40,000 88,000 $1,543,500 $

60,500 810,000

673,000

Stockholders' Equity P5-33 Incomplete Data

$1,543,500

a.

$15,000

= ($115,000 + $46,000) - $146,000

b.

$65,000

= ($148,000 - $98,000) + $15,000

c.

Skyler: $24,000

= $380,000 - ($46,000 + $110,000 + $75,000 + $125,000) = $94,000 - $24,000

Blue: $70,000 d.

Fair value of Skyler as a whole: $200,000 10,000

Book value of Skyler shares Differential assigned to inventory ($195,000 - $105,000 - $80,000) Differential assigned to buildings and equipment ($780,000 - $400,000 - $340,000) Differential assigned to goodwill Fair value of Skyler

40,000 9,000 $259,000 e.

65 percent

=

1.00 – ($90,650 / $259,000)

f.

Capital Stock Retained Earnings

= =

$120,000 $115,000

.

5-66

P5-34 Income and Retained Earnings a.

Net income for 20X9: Operating income Income from subsidiary Net income

Quill $ 90,000 24,500 $114,500

North $35,000

Quill $290,000 114,500 (30,000) $374,500

North $40,000 35,000 (10,000) $65,000

$35,000

b. Consolidated net income is $125,000 ($90,000 + $35,000). c. Retained earnings reported at December 31, 20X9: Retained earnings, January 1, 20X9 Net income for 20X9 Dividends paid in 20X9 Retained earnings, December 31, 20X9

d. Consolidated retained earnings at December 31, 20X9, is equal to the $374,500 retained earnings balance reported by Quill. e. When the cost method is used, the parent's proportionate share of the increase in retained earnings of the subsidiary subsequent to acquisition is not included in the parent's retained earnings. Thus, this amount must be added to the total retained earnings reported by the parent in arriving at consolidated retained earnings.

5-67

P5-35 Consolidation Worksheet at End of First Year of Ownership a. Equity Method Entries on Power Corp.'s Books: Investment in Best Co. Cash Record the initial investment in Best Co.

96,000 96,000

Investment in Best Co. 18,000 Income from Best Co. Record Power Corp.'s 75% share of Best Co.'s 20X8 income

18,000

Cash 12,000 Investment in Best Co. Record Power Corp.'s 75% share of Best Co.'s 20X8 dividend

12,000

Income from Best Co. Investment in Best Co. Record amortization of excess acquisition price

5,625 5,625



NCI 25% 25,000 6,000 (4,000)

Ending book value

27,000

+

Power Corp. 75% 75,000 18,000 (12,000) 81,000

=

Common Stock 60,000

+

60,000

1/1/X8

12/31/X8

Goodwill = 6,000

Goodwill = 1,875


Excess = 13,500

75% Book value = 75,000

$96,000 Initial investment in Best Co.

5-68

75% Book value = 81,000


$96,375 Net investment in Best Co.

P5-35 (continued) Basic elimination entry Common stock Retained earnings Income from Best Co. NCI in NI of Best Co. Dividends declared Investment in Best Co. NCI in NA of Best Co.

60,000 40,000 18,000 6,000 16,000 81,000 27,000

Excess Value (Differential) Calculations: NCI Power Corp. 25% + 75% Beginning balance 7,000 21,000 Changes (1,875) (5,625) Ending balance 5,125 15,375 Amortized excess value reclassification entry: Depreciation expense Goodwill impairment loss Income from Best Co. NCI in NI of Best Co.

=

Buildings & Equipment 20,000 20,000

+

Acc. Depr. 0 (2,000) (2,000)

+

Goodwill 8,000 (5,500) 2,500

2,000 5,500 5,625 1,875

Excess value (differential) reclassification entry: Buildings & Equipment Goodwill Acc. Depr. Investment in Best Co. NCI in NA of Best Co.

20,000 2,500 2,000 15,375 5,125

Optional accumulated depreciation elimination entry Accumulated depreciation 30,000 Building & equipment 30,000


Ending Balance

Investment in Best Co. 96,000 18,000 12,000 5,625 96,375

Income from Best Co.


81,000

Basic

15,375

Excess Reclass.

0

5-69

18,000

75% Net Income

12,375

Ending Balance

5,625 18,000 5,625 0

P5-35 (continued) b. Income Statement Sales Less: COGS Less: Wage Expense Less: Depreciation Expense Less: Interest Expense Less: Other Expenses Less: Impairment Loss Income from Best Co. Consolidated Net Income NCI in Net Income Controlling Interest in Net Income

Power Corp.

Best Co.

260,000 (125,000) (42,000) (25,000) (12,000) (13,500)

180,000 (110,000) (27,000) (10,000) (4,000) (5,000)

Elimination Entries DR CR

Consolidated

5,500 18,000 25,500 6,000

5,625 5,625 1,875

440,000 (235,000) (69,000) (37,000) (16,000) (18,500) (5,500) 0 59,000 (4,125)

24,000

31,500

7,500

54,875

102,000 54,875 (30,000) 126,875

40,000 24,000 (16,000) 48,000

40,000 31,500

7,500 16,000 23,500

102,000 54,875 (30,000) 126,875

47,500 70,000 90,000 30,000 350,000 (145,000) 96,375

21,000 12,000 25,000 15,000 150,000 (40,000)

20,000 30,000

538,875

183,000

2,500 50,000

Accounts Payable Wages Payable Notes Payable Common Stock Retained Earnings NCI in NA of Best Co.

45,000 17,000 150,000 200,000 126,875

16,000 9,000 50,000 60,000 48,000

60,000 71,500


538,875

183,000

131,500

Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Cash Accounts Receivable Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Best Co. Goodwill Total Assets

12,375 54,875

24,000

54,875

5-70

2,000

71,500

30,000 2,000 81,000 15,375 128,375

23,500 27,000 5,125 23,500

68,500 82,000 115,000 45,000 490,000 (157,000) 0 2,500 646,000 61,000 26,000 200,000 200,000 126,875 32,125 646,000

P5-36 Consolidation Worksheet at End of Second Year of Ownership a. Equity Method Entries on Power Corp.'s Books: Investment in Best Co. 27,000 Income from Best Co. Record Power Corp.'s 75% share of Best Co.'s 20X9 income Cash 15,000 Investment in Best Co. Record Power Corp.'s 75% share of Best Co.'s 20X9 dividend Income from Best Co. Investment in Best Co. Record amortization of excess acquisition price

27,000

15,000

1,500 1,500



NCI 25% 27,000 9,000 (5,000)

Ending book value

31,000

+

Power Corp. 75% 81,000 27,000 (15,000)

=

93,000

Common Stock 60,000

+


60,000

1/1/X9

12/31/X9

Goodwill = 1,875

Goodwill = 1,875


Excess = 12,000

75% Book value = 81,000


5-71

75% Book value = 93,000

64,000


P5-36 (continued) Basic elimination entry Common stock Retained earnings Income from Best Co. NCI in NI of Best Co. Dividends declared Investment in Best Co. NCI in NA of Best Co.

60,000 48,000 27,000 9,000 20,000 93,000 31,000

Excess Value (Differential) Calculations:

Beginning balance Changes Ending balance

NCI 25% 5,125 (500) 4,625

+

Power Corp. 75% 15,375 (1,500) 13,875

Buildings and Equipment 20,000

=

20,000

Amortized excess value reclassification entry: Depreciation expense Income from Best Co. NCI in NI of Best Co.

Ending Balance

+

Goodwill 2,500 0 2,500

1,500 500

20,000 2,500 4,000 13,875 4,625


Beginning Balance 75% Net Income

Acc. Depr. (2,000) (2,000) (4,000)

2,000

Excess value (differential) reclassification entry: Buildings and Equipment Goodwill Acc. Depr. Investment in Best Co. NCI in NA of Best Co.

Investment in Best Co. 96,375 27,000 15,000 1,500 106,875

+

40,000 Income from Best Co.


93,000

Basic

13,875

Excess Reclass.

0

5-72

27,000

75% Net Income

25,500

Ending Balance

1,500 27,000 1,500 0

P5-36 (continued) b. Power Corp. Income Statement Sales Less: COGS Less: Wage Expense Less: Depreciation Expense Less: Interest Expense Less: Other Expenses Income from Best Co. Consolidated Net Income NCI in Net Income Controlling Interest in Net Income

Best Co.


290,000 (145,000) (35,000) (25,000) (12,000) (23,000) 25,500 75,500

200,000 (114,000) (20,000) (10,000) (4,000) (16,000)

75,500

36,000

126,875 75,500 (30,000) 172,375

48,000 36,000 (20,000) 64,000

68,500 85,000 97,000 50,000 350,000 (170,000) 106,875

32,000 14,000 24,000 25,000 150,000 (50,000)

20,000 40,000

587,375

195,000

2,500 60,000

Accounts Payable Wages Payable Notes Payable Common Stock Retained Earnings NCI in NA of Best Co.

51,000 14,000 150,000 200,000 172,375

15,000 6,000 50,000 60,000 64,000

60,000 86,000


587,375

195,000

146,000

Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Cash Accounts Receivable Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Best Co. Goodwill Total Assets

36,000

5-73

1,500 1,500 500 2,000

490,000 (259,000) (55,000) (37,000) (16,000) (39,000) 0 84,000 (8,500) 75,500

2,000 20,000 22,000

126,875 75,500 (30,000) 172,375

2,000

27,000 29,000 9,000 38,000

48,000 38,000 86,000

Consolidated

40,000 4,000 93,000 13,875 150,875

22,000 31,000 4,625 22,000

100,500 99,000 121,000 75,000 480,000 (184,000) 0 2,500 694,000 66,000 20,000 200,000 200,000 172,375 35,625 694,000

P5-36 (continued)

c.

Power Corporation and Subsidiary Consolidated Balance Sheet December 31, 20X9

Cash Accounts Receivable Inventory Land Buildings and Equipment Less: Accumulated Depreciation Goodwill Total Assets

$480,000 (184,000)

Accounts Payable Wages Payable Notes Payable Stockholders’ Equity: Controlling Interest: Common Stock Retained Earnings Total Controlling Interest Noncontrolling Interest Total Stockholders’ Equity Total Liabilities and Stockholders' Equity

$100,500 99,000 121,000 75,000 296,000 2,500 $694,000 $ 66,000 20,000 200,000

$200,000 172,375 $372,375 35,625

408,000 $694,000

Power Corporation and Subsidiary Consolidated Income Statement Year Ended December 31, 20X9 Sales Cost of Goods Sold Wage Expense Depreciation Expense Interest Expense Other Expenses Total Expenses Consolidated Net Income Income to Noncontrolling Interest Income to Controlling Interest

$259,000 55,000 37,000 16,000 39,000

$490,000

(406,000) $ 84,000 (8,500) $ 75,500

Power Corporation and Subsidiary Consolidated Retained Earnings Statement Year Ended December 31, 20X9 Retained Earnings, January 1, 20X9 Income to Controlling Interest, 20X9

$126,875 75,500 $202,375 (30,000) $172,375

Dividends Declared, 20X9 Retained Earnings, December 31, 20X9

5-74

5-75

P5-37 Comprehensive Problem: Majority-Owned Subsidiary a. Equity Method Entries on Master Corp.'s Books: Investment in Stanley Wood Co. 24,000 Income from Stanley Wood Co. 24,000 Record Master Corp.'s 80% share of Stanley Wood Co.'s 20X5 income Cash 8,000 Investment in Stanley Wood Co. 8,000 Record Master Corp.'s 80% share of Stanley Wood Co.'s 20X5 dividend Income from Stanley Wood Co. Investment in Stanley Wood Co. Record amortization of excess acquisition price

4,000 4,000



NCI 20% 38,000 6,000 (2,000)

Ending book value

42,000

+

Master Corp. 80% 152,000 24,000 (8,000) 168,000

5-76

=


100,000

+


1/1/X5

12/31/X5

Goodwill = 0

Goodwill = 0


Excess = 20,000

80% Book value = 152,000

$176,000 Net investment in Stanley Wood Co.

5-77

80% Book value = 168,000

$188,000 Net investment in Stanley Wood Co.

P5-37 (continued) Basic elimination entry Common stock Retained earnings Income from Stanley Wood Co. NCI in NI of Stanley Wood Co. Dividends declared Investment in Stanley Wood Co. NCI in NA of Stanley Wood Co.

100,000 90,000 24,000 6,000 10,000 168,000 42,000

Excess Value (Differential) Calculations: NCI Master Corp. 20% + 80% Beginning balance 6,000 24,000 Changes (1,000) (4,000) Ending balance 5,000 20,000 Amortized excess value reclassification entry: Depreciation expense Income from Stanley Wood Co. NCI in NI of Stanley Wood Co.

=

50,000

50,000 25,000 20,000 5,000 10,000 10,000

Investment in Stanley Wood Co.

Ending Balance

Acc. Depr. (20,000) (5,000) (25,000)

4,000 1,000

Eliminate intercompany accounts: Accounts payable Cash and receivables

Income from Stanley Wood Co.

176,000 24,000 8,000 4,000

+

5,000

Excess value (differential) reclassification entry: Buildings & Equipment Acc. Depr. Investment in Stanley Wood Co. NCI in NA of Stanley Wood Co.



80% Dividends Excess Val. Amort. Basic

20,000

Excess Reclass.

0

5-78

80% Net Income

20,000

Ending Balance

4,000

188,000 168,000

24,000

24,000 4,000 0

P5-37 (continued) c. Master Corp.

Stanley Wood Co.

200,000

100,000

300,000

(120,000)

(50,000)

(170,000)

Less: Depreciation Expense

(25,000)

(15,000)

Less: Inventory Losses

(15,000)

(5,000)


CR

Consolidated

Income Statement Sales Less: COGS

Income from Stanley Wood Co.

20,000


60,000

30,000


5,000

(45,000) (20,000)

24,000

4,000

0

29,000

4,000

65,000

6,000

1,000

(5,000)

5,000

60,000

60,000

30,000

35,000

314,000

90,000

90,000

60,000

30,000

35,000


(30,000)

(10,000)

Ending Balance

344,000

110,000

81,000

65,000

260,000

90,000


125,000

314,000 5,000

60,000

10,000

(30,000)

15,000

344,000

10,000

136,000

Balance Sheet Cash and Receivables Inventory Land

80,000

80,000

500,000

150,000

Less: Accumulated Depreciation

(205,000)

(105,000)

Investment in Stanley Wood Co.

188,000

Buildings & Equipment

350,000 160,000 50,000

700,000 25,000

(335,000)

168,000

0

20,000 Total Assets

904,000

280,000

50,000

60,000

20,000

10,000

Notes Payable

200,000

50,000

Common Stock

300,000

100,000

100,000

Retained Earnings

344,000

110,000

125,000

Accounts Payable

35,000

1,011,000 70,000 250,000

NCI in NA of Stanley Wood Co.

300,000 15,000

344,000

42,000

47,000


904,000

280,000

5-79

235,000

57,000

1,011,000

P5-38 Comprehensive Problem: Differential Apportionment a. Equity Method Entries on Mortar Corp.'s Books: Investment in Granite Co. Cash Record the initial investment in Granite Co.

173,000 173,000

Investment in Granite Co. 48,000 Income from Granite Co. Record Mortar Corp.'s 80% share of Granite Co.'s 20X7 income

48,000

Cash 16,000 Investment in Granite Co. Record Mortar Corp.'s 80% share of Granite Co.'s 20X7 dividend

16,000

Income from Granite Co. Investment in Granite Co. Record amortization of excess acquisition price b.

3,000 3,000



NCI 20% 30,000 12,000 (4,000)

Ending book value

38,000

+

Mortar Corp. 80% 120,000 48,000 (16,000)

=

152,000

Common Stock 50,000

+


50,000

140,000

1/1/X7

12/31/X7

Goodwill = 20,000

Goodwill = 20,000


Excess = 30,000

80% Book value = 120,000

$173,000 Initial investment in Granite Co.

5-80

80% Book value = 152,000

$202,000 Net investment in Granite Co.

P5-38 (continued) Basic elimination entry Common stock Retained earnings Income from Granite Co. NCI in NI of Granite Co. Dividends declared Investment in Granite Co. NCI in NA of Granite Co.

50,000 100,000 48,000 12,000 20,000 152,000 38,000

Excess Value (Differential) Calculations: NCI Mortar 20% + Corp. 80% Beginning balance 13,250 53,000 Changes (750) (3,000) Ending balance 12,500 50,000

=

Buildings & Equipment 41,250 41,250

Amortized excess value reclassification entry: Depreciation expense Income from Granite Co. NCI in NI of Granite Co.

Goodwill 25,000 0 25,000

41,250 25,000 3,750 50,000 12,500 16,000 16,000


Ending Balance

+

3,000 750

Eliminate intercompany accounts: Accounts payable Accounts receivable


Acc. Depr. 0 (3,750) (3,750)

3,750

Excess value (differential) reclassification entry: Buildings & Equipment Goodwill Acc. Depr. Investment in Granite Co. NCI in NA of Granite Co.

Investment in Granite Co. 173,000 48,000 16,000 3,000 202,000 152,000 50,000 0

+

60,000 Income from Granite Co.

80% Dividends Excess Val. Amort. Basic Excess Reclass.

5-81

48,000

80% Net Income

45,000

Ending Balance

3,000 48,000 3,000 0

P5-38 (continued) c. Elimination Entries DR CR

Mortar Corp.

Granite Co.

700,000 (500,000) (25,000) (75,000) 45,000 145,000

400,000 (250,000) (15,000) (75,000) 60,000

48,000 51,750 12,000

3,000 3,000 750

1,100,000 (750,000) (43,750) (150,000) 0 156,250 (11,250)

145,000

60,000

63,750

3,750

145,000

290,000 145,000 (50,000) 385,000

100,000 60,000 (20,000) 140,000

100,000 63,750

3,750 20,000 23,750

290,000 145,000 (50,000) 385,000

38,000 50,000 240,000 80,000 500,000 (155,000) 202,000

25,000 55,000 100,000 20,000 150,000 (75,000)

41,250 60,000

955,000

275,000

25,000 101,250

Accounts Payable Mortgage Payable Common Stock Retained Earnings NCI in NA of Granite Co.

70,000 200,000 300,000 385,000

35,000 50,000 50,000 140,000

50,000 163,750


955,000

275,000

229,750

Income Statement Sales Less: COGS Less: Depreciation Expense Less: Other Expenses Income from Granite Co. Consolidated Net Income NCI in Net Income Controlling Interest in Net Income Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Cash Accounts Receivable Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Granite Co. Goodwill Total Assets

5-82

3,750

163,750

16,000 60,000 3,750 152,000 50,000 79,750

16,000 23,750 38,000 12,500 61,750

Consolidated

63,000 89,000 340,000 100,000 631,250 (173,750) 0 25,000 1,074,500 89,000 250,000 300,000 385,000 50,500 1,074,500

P5-39 Comprehensive Problem: Differential Apportionment in Subsequent Period. a. Equity Method Entries on Mortar Corp.'s Books: 36, Investment in Granite Co.

000

36,00 Income from Granite Co. 0 Record Mortar Corp.'s 80% share of Granite Co.'s 20X8 income 20, Cash

000

20,00 Investment in Granite Co. 0 Record Mortar Corp.'s 80% share of Granite Co.'s 20X8 dividend 11, Income from Granite Co.

800

Investment in Granite Co. Record amortization of excess acquisition price b. Book Value Calculations: NCI 20% Original book value

38,00 0

+

Mortar Corp. 80% 152,000

11,80 0

Comm = on Stock 50,00 0

Retaine d + Earning s 140,000

+ Net Income

9,000

36,000

45,000

- Dividends

(5,000 )

(20,000)

(25,000 )

42,00 0

168,000

Ending book value

5-83

50,00 0

160,000

1/1/X8

12/31/X8 Goodwill = 11,200

Goodwill = 20,000 Identifiable excess = 30,000

80% Book value = 152,000

$202,000 Net investmen t in Granite Co.

5-84

Excess = 27,000

80% Book value = 168,000

$206,200 Net investmen t in Granite Co.

P5-39 (continued) Basic elimination entry 5 Common stock

0,000 14 0,000 3 6,000

Retained earnings Income from Granite Co. NCI in NI of Granite Co.

9,000 25,00 0 168,0 00 42,00 0

Dividends declared Investment in Granite Co. NCI in NA of Granite Co. Excess Value (Differential) Calculations:

Beginning balance Changes Ending balance

NCI 20% 12,5 00 (2,9 50) 9,55 0

Mortar Corp. + 80%

Building s& Equipm = ent

50,000 (11,80 0)

41,250

38,200

41,250

+

Acc. Depr. (3,75 0) (3,75 0) (7,50 0)

Amortized excess value reclassification entry: 3,75 0 11,0 00

Depreciation expense Goodwill impairment loss

11,80 0 2,950

Income from Granite Co. NCI in NI of Granite Co. Excess value (differential) reclassification entry: 41,2 50 14,0 00

Buildings & Equipment Goodwill Acc. Depr.

7,500 38,20 0

Investment in Granite Co.

5-85

+

Good will 25,00 0 (11,00 0) 14,00 0

NCI in NA of Granite Co. Eliminate intercompany accounts: Accounts payable Accounts receivable

9,550

9,000 9,000

Optional accumulated depreciation elimination entry Accumulated 6 depreciation 0,000 Building & equipment

60,00 0 Investment in Granite Co.

Income from Granite Co.

Beginning 202,0 Balance 00 80% Net 36,00 Income 0 20,00 0

80% Dividends

11,80 0

Excess Val. Amort.


0

5-86

80% Net Income

24,20 0

Ending Balance

11,8 00

Ending 206,2 Balance 00 168,0 00 38,20 0

36,00 0

36,0 00 11,80 0 0

P5-39 (continued) c. Elimination Entries Mortar Corp.

Granit e Co.

650,00 0 (490,00 0) (25,000 ) (62,000 )

470,00 0 (310,00 0) (15,000 ) (100,00 0)

DR

CR

Consolida ted

Income Statement Sales Less: COGS Less: Depreciation Expense Less: Other Expenses Less: Goodwill Impairment Income from Granite Co.

24,200

Consolidated Net Income NCI in Net Income Controlling Interest in Net Income

97,200

45,000

97,200

45,000

385,00 0

140,00 0

1,120,000 (800,000) 3,750

(43,750) (162,000)

11,00 0 36,00 0 50,75 0 9,000 59,75 0

(11,000) 11,80 0 11,80 0 2,950 14,75 0

0 103,250 (6,050) 97,200

Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Cash Accounts Receivable Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Granite Co.

97,200 (45,000 ) 437,20 0

45,000 (25,000 ) 160,00 0

59,000 83,000 275,00 0 80,000 500,00 0 (180,00 0) 206,20 0

31,000 71,000 118,00 0 30,000 150,00 0 (90,000 )

140,0 00 59,75 0 199,7 50

5-87

437,200

9,000

90,000 145,000

97,200 (45,000)

393,000 110,000 41,25 0 60,00 0

14,00 0

Goodwill

385,000 14,75 0 25,00 0 39,75 0

60,00 0 7,500 168,0 00 38,20 0

631,250 (217,500) 0

14,000

Total Assets Accounts Payable Mortgage Payable Common Stock Retained Earnings

1,023, 200

310,00 0

101,2 50

86,000 200,00 0 300,00 0 437,20 0

30,000

9,000

50,000 160,00 0

1,023, 200

310,00 0

5-88

1,165,750 107,000

70,000

270,000 50,00 0 199,7 50

NCI in NA of Granite Co. Total Liabilities & Equity

76,50 0

258,7 50

300,000 39,75 0 42,00 0 9,550 81,75 0

437,200 51,550 1,165,750

P5-40 Subsidiary with Other Comprehensive Income in Year of Acquisition a. Equity Method Entries on Amber Corp.'s Books: Investment in Sparta Co. Cash Record the initial investment in Sparta Co.

96,000 96,000

Investment in Sparta Co. 15,000 Income from Sparta Co. Record Amber Corp.'s 60% share of Sparta Co.'s 20X8 income

15,000

Cash 9,000 Investment in Sparta Co. Record Amber Corp.'s 60% share of Sparta Co.'s 20X8 dividend

9,000

Investment in Sparta Co. 6,000 Other Comprehensive Income from Sparta Co. Record share of increase in value of securities held by Sparta Co.

6,000



NCI 40% 64,000 10,000 (6,000)

Ending book value

68,000

+

Amber Corp. 60% 96,000 15,000 (9,000) 102,000

=


+

100,000

1/1/X8

12/31/X8

Goodwill = 0

Goodwill = 0


Excess = 0

60% Book value = 96,000

$96,000 Initial investment in Sparta Co.

5-89

60% Book value = 108,000


$108,000 Net investment in Sparta Co.

P5-40 (continued) Basic elimination entry Common stock Retained earnings Income from Sparta Co. NCI in NI of Sparta Co. Dividends declared Investment in Sparta Co. NCI in NA of Sparta Co. Other Comprehensive Income Entry: OCI from Sparta Co. OCI to the NCI Investment in Sparta Co. NCI in NA of Sparta Co.


Ending Balance

Investment in Sparta Co. 96,000 15,000 9,000 6,000 108,000 102,000 6,000 0

100,000 60,000 15,000 10,000 15,000 102,000 68,000

6,000 4,000 6,000 4,000 Income from Sparta Co. 15,000

60% Net Income

15,000

Ending Balance

60% Dividends OCI Entry Basic OCI

15,000 0

5-90

P5-40 (continued) b. Income Statement Sales Less: COGS Less: Depreciation Expense Less: Interest Expense Income from Sparta Co. Consolidated Net Income NCI in Net Income Controlling Interest in Net Income Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Cash Accounts Receivable Inventory Buildings & Equipment Less: Accumulated Depreciation Investment in Row Company Investment in Sparta Co.

Amber Corp.

Sparta Co.

220,000 (150,000) (30,000) (8,000) 15,000 47,000

148,000 (110,000) (10,000) (3,000)

47,000

25,000

208,000 47,000 (24,000) 231,000

60,000 25,000 (15,000) 70,000

27,000 65,000 40,000 500,000 (140,000)

8,000 22,000 30,000 235,000 (85,000) 40,000

25,000

15,000 15,000 10,000 25,000

60,000 25,000 85,000

600,000

250,000

Accounts Payable Bonds Payable Common Stock Retained Earnings Accumulated OCI NCI in NA of Sparta Co.

63,000 100,000 200,000 231,000 6,000

20,000 50,000 100,000 70,000 10,000


600,000

250,000

0

0 15,000 15,000

208,000 47,000 (24,000) 231,000

75,000

75,000

100,000 85,000 10,000 185,000

Consolidated 368,000 (260,000) (40,000) (11,000) 0 57,000 (10,000) 47,000

75,000

108,000

Total Assets

Other Comprehensive Income Accumulated Other Comprehensive Income, 1/1/20X8 Other Comprehensive Income from Sparta Co. Unrealized Gain on Investments Other Comprehensive Income to NCI Accumulated Other Comprehensive Income, 12/31/20X8


102,000 6,000 75,000

15,000 68,000 4,000 83,000

35,000 87,000 70,000 660,000 (150,000) 40,000 0 742,000 83,000 150,000 200,000 231,000 6,000 72,000 742,000

0 6,000

6,000

0 10,000 (4,000)

10,000 4,000 6,000

10,000

5-91

10,000

0

6,000

P5-40 (continued) c.

Amber Corporation and Subsidiary Consolidated Balance Sheet December 31, 20X8

Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation Investment in Marketable Securities Total Assets

$660,000 (150,000)

Accounts Payable Bonds Payable Stockholders’ Equity: Controlling Interest: Common Stock Retained Earnings Accumulated Other Comprehensive Income Total Controlling Interest Noncontrolling Interest Total Stockholders’ Equity Total Liabilities and Stockholders' Equity

$ 35,000 87,000 70,000 510,000 40,000 $742,000 $ 83,000 150,000

$200,000 231,000 6,000 $437,000 72,000

509,000 $742,000

Amber Corporation and Subsidiary Consolidated Income Statement Year Ended December 31, 20X8 Sales Cost of Goods Sold Depreciation Expense Interest Expense Total Expenses Consolidated Net Income Income to Noncontrolling Interest Income to Controlling Interest

$260,000 40,000 11,000

$368,000

(311,000) $ 57,000 (10,000) $ 47,000

Amber Corporation and Subsidiary Consolidated Statement of Comprehensive Income Year Ended December 31, 20X8 Consolidated Net Income Other Comprehensive Income: Unrealized Gain on Investments Held by Subsidiary Total Consolidated Comprehensive Income Less: Comprehensive Income Attributable to Noncontrolling Interest Comprehensive Income Attributable to Controlling Interest

5-92

$57,000 10,000 $67,000 (14,000) $53,000

P5-41 Subsidiary with Other Comprehensive Income in Year Following Acquisition a. Equity Method Entries on Amber Corp.'s Books: Investment in Sparta Co. Cash Record the initial investment in Sparta Co.

108,000 108,000

Investment in Sparta Co. 18,000 Income from Sparta Co. Record Amber Corp.'s 60% share of Sparta Co.'s 20X9 income

18,000

Cash 12,000 Investment in Sparta Co. Record Amber Corp.'s 60% share of Sparta Co.'s 20X9 dividend

12,000

Investment in Sparta Co. 2,400 Other Comprehensive Income from Sparta Co. Record share of increase in value of securities held by Sparta Co.

2,400



NCI 40% 72,000 12,000 (8,000)

Ending book value

76,000

+

Amber Corp. 60% 108,000 18,000 (12,000) 114,000

=


+

100,000

1/1/X9

12/31/X9

Goodwill = 0

Goodwill = 0

80,000

+

OCI 10,000

10,000

Excess = 0

Excess = 0

60% Book value = 108,000



P5-41 (continued)

5-93

60% Book value = 116,400


Basic elimination entry Common stock Retained earnings Accumulated OCI Income from Sparta Co. NCI in NI of Sparta Co. Dividends declared Investment in Sparta Co. NCI in NA of Sparta Co. Other Comprehensive Income Entry: OCI from Sparta Co. OCI to the NCI Investment in Sparta Co. NCI in NA of Sparta Co.


Ending Balance

Investment in Sparta Co. 108,000 18,000 12,000 2,400 116,400 114,000 2,400 0

100,000 70,000 10,000 18,000 12,000 20,000 114,000 76,000

2,400 1,600 2,400 1,600 Income from Sparta Co. 18,000

60% Net Income

18,000

Ending Balance

60% Dividends OCI Entry Basic OCI

18,000 0

5-94

P5-41 (continued) b. Income Statement Sales Less: COGS Less: Depreciation Expense Less: Interest Expense Income from Sparta Co. Consolidated Net Income NCI in Net Income Controlling Interest in Net Income Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Cash Accounts Receivable Inventory Buildings & Equipment Less: Accumulated Depreciation Investment in Row Company Investment in Sparta Co.


Amber Corp.

Sparta Co.

250,000 (170,000) (30,000) (8,000) 18,000 60,000

140,000 (97,000) (10,000) (3,000) 30,000

18,000 18,000 12,000

60,000

30,000

30,000

231,000 60,000 (40,000) 251,000

70,000 30,000 (20,000) 80,000

70,000 30,000

18,000 45,000 40,000 585,000 (170,000)

11,000 21,000 30,000 257,000 (95,000) 44,000

100,000

390,000 (267,000) (40,000) (11,000) 0 72,000 (12,000) 0

60,000

0 20,000 20,000

231,000 60,000 (40,000) 251,000

75,000 75,000

116,400

114,000 2,400 75,000

29,000 66,000 70,000 767,000 (190,000) 44,000 0

Total Assets

634,400

268,000

Accounts Payable Bonds Payable Common Stock Retained Earnings Accumulated OCI NCI in NA of Sparta Co.

75,000 100,000 200,000 251,000 8,400

24,000 50,000 100,000 80,000 14,000


634,400

268,000

200,000

6,000

10,000

10,000

6,000

2,400

0 4,000 (1,600)

Other Comprehensive Income Accumulated Other Comprehensive Income, 1/1/20X9 Other Comprehensive Income from Sparta Co. Unrealized Gain on Investments Other Comprehensive Income to NCI Accumulated Other Comprehensive Income, 12/31/20X9

2,400

75,000

Consolidated

100,000 100,000 14,000

20,000 76,000 1,600 96,000

4,000 1,600 8,400

14,000

5-95

14,000

0

786,000 99,000 150,000 200,000 251,000 8,400 77,600 786,000

8,400

Chapter 5 - Solution Manual

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